Stock Market Update

[BRIEFING.COM] The stock market moved lower in the first session of a week that is likely to be defined by Wednesday's FOMC decision.

Stocks have seen some muted back-and-forth action leading up to this week's FOMC meeting, with the S&P 500 (-0.4%), Nasdaq Composite (-0.1%), and DJIA (-0.5%) all moving lower today as gains in the information technology sector (+1.0%) could not outweigh broader-market weakness. 

The other ten S&P 500 sectors finished with losses, the widest being that of the communication services sector (-1.8%). While the sector's underperformance is more easily attributed to weakness in its mega-cap components, Alphabet (GOOG 314.45, -7.64, -2.37%) and Meta Platforms (META 667.07, -6.35, -0.94%), new headlines around the takeover of Warner Bros. Discovery (WBD 27.23, +1.15, +4.41%) garnered the lion's share of media coverage today. 

Paramount Skydance's (PSKY 14.57, +1.20, +9.02%) unsolicited $30-per-share all-cash offer for Warner Bros. Discovery marks a new escalation in the takeover fight, directly challenging WBD's earlier cash-and-stock agreement with Netflix (NFLX 96.82, -3.42, -3.41%). According to The New York Post, WBD CEO David Zaslav has told associates he believes the Ellison family could raise its bid high enough to cover Netflix's breakup fee.

Netflix faced additional pressure after being downgraded to Neutral from Buy at Rosenblatt.

Tesla (TSLA 439.58, -15.42, -3.39%) also moved lower following a downgrade today, with Morgan Stanley downgrading the stock to Equal Weight from Overweight, citing valuation concerns.

The consumer discretionary sector (-1.5%) finished near the bottom of today's leaderboard as a result. Weakness in homebuilder names sent the iShares U.S. Home Construction ETF 2.1% lower.

Mega-cap weakness saw the Vanguard Mega Cap Growth ETF finish 0.2% lower, though soft participation across the broader market still saw the market-weighted S&P 500 (-0.4%) slightly outperform the S&P 500 Equal Weighted Index (-0.6%). 

Decliners outpaced advancers by a nearly 2-to-1 ratio on the NYSE and a roughly 5-to-4 clip on the Nasdaq, putting pressure on high-beta-heavy and defensive sectors alike. Six S&P 500 sectors faced a retreat of 1.0% or wider.

The information technology sector (+1.0%) was the lone bright spot, with some particularly strong performances across the sector's largest names. 

NVIDIA (NVDA 185.57, +3.16, +1.73%) and Broadcom (AVGO 401.10, +10.86, +2.78%) contributed to a 1.1% gain in the PHLX Semiconductor Index, with Broadcom trading higher after reports that Microsoft (MSFT 491.02, +7.86, +1.63%) is interested in shifting its custom chips business to the company. 

Meanwhile, Oracle (ORCL 220.56, +2.98, +1.37%) traded higher ahead of its earnings release Wednesday after the close. 

While the major averages did not successfully push toward record highs today, the technology sector's leadership kept the major averages at or above their unchanged levels for the month of December. The sector holds a 2.3% month-to-date gain for December, while the S&P 500 is flat over the same time period. 

Looking ahead, market participants continue to lean on expectations that the Fed will deliver a 25-basis-point rate cut on Wednesday, though sentiment has increasingly shifted toward the idea of a "hawkish "cut"—one in which the Fed eases policy this week but signals that additional reductions may be slow to follow.

U.S. Treasuries saw some modest selling interest in the overnight trade, tried to recover early in the cash session, but then came under renewed selling pressure that pushed yields higher across the curve despite some otherwise decent results for the $58 billion 3-year note auction. The 2-year note yield settled up two basis points to 3.58%, and the 10-year note yield settled up three basis points to 4.17%.

There were no economic data releases of note today. 

• Nasdaq Composite: +21.9% YTD
• S&P 500: +16.4% YTD
• Russell 2000: +13.0% YTD
• DJIA: +12.2% YTD
• S&P MidCap 400: +5.8% YTD